I thought to make a thread to cover what I thought was one of the most impressive reports AppLovin has had. They had guided for the following with the following actuals
Q3 Revenue 1320 - 1340M → actual 1405
Adj EBITDA 1070 - 1090 → actual 1158
New Q4 revenue guided 1570 - 1600M
Q4 Adj EBITDA guided 1290 - 1320M
The actual numbers landing in Q3 were a decent beat, but this guidance is a big step up. Normally the company guides slightly above where the current quarter ended. What I mean is that landing at 1405M is usually good for revenue guidance of a range like 1420 - 1440, but now they are moving this all the way up to 1570 - 1600!
Additionally, adj EBITDA landed at 1158, and getting 1320M of adj EBITDA would be 14% qoq, for what is already an incredibly profitable business.
One more item that seems to get overlooked by the market is that share count over the last three quarters has gone down from 346M to 341M. The company’s cash balance has gone from 551M → 1193 → 1667 in the last couple quarters as well, showing they are adding up cash on the balance sheet even with buying back all these shares and covering the cost of stock based comp easily.
Some other details from the call,
MAX supply side platform grows at “very healthy rates”
Opened international web ahead of schedule in Q3
“We’re already seeing spend from these self service advertisers growing around 50% week over week”
Ramping more AI agents in workflow
Testing generative AI based ad creatives, “That in itself can really explode the count of ads on the platform”
Testing paid marketing to promote Axon Ads to new customers
Flow through to adj EBITDA 95%, slightly above Q2
FCF 1.049B +92% yoy
Increasing conversion rate, multiple model enhancements in the quarter help
“The ramp up is really swift”
Continues to compound and adding new customers, “This thing is going to then snowball on itself”
“We’re not supply constrained today, we’re demand constrained”
“Full blown automation of a salesforce”
“Very lean sales teams”
Focused on increasing demand in the near term, but will be talking about both sides more in the future
Overall I thought this may be the strongest report they have had since I have owned the company. It is a further confirmation their web platform is ramping up as expected and seems all setup for a Q4 that is again going to over deliver.
You have no idea how many times a day i check to see if you left any commentary on the earnings if IREN, APP, ALAB which are my top holdings. I value you analysis very much and thank you for sharing your thoughts
At the end of the call there was a question about their guidance, and how they arrive at it. The CFO said they guide towards something that they feel very confident in hitting, and going forward it is 12-14% sequential growth per quarter. This number does NOT include any new business from the web, as he said they just don’t know enough about it to forecast it (this is the same sector that is barely available to the general public, and is already posting 50% weekly increases!).
If we assume a beat, which has been the case for the past 6 quarters now, and they come in at a ‘paltrey’ 15% growth, it compounds to ~75% annually. Note also that net income increased at a greater rate than revenue in the past quarter – something they said they think will continue.
It seems to me they are poised to continue to beat and raise for at least several quarters to come, and that the flywheel effect Adam spoke about in earlier reports is starting to show itself. This one is a beast!
“Yes. And in terms of guidance, I think we’ve done pretty consistent to our approach thus far. We’ve communicated before that we guide to kind of where we feel very comfortable that we could potentially land.
So we guide to what we know. We don’t guide to try to estimate for something that’s unpredictable. And in this case, we can’t predict the number or the volume of new advertisers coming on to the system through the referral program and how that potential ramp in spend could happen through the quarter.
So there is no incremental assumption built into the guide for onboarding of incremental customers.”
So while you are correct that 12 - 14% was the sequential guide for Q4, I don’t see that he said anything to indicate that level of sequential growth “going forward” next year or in subsequent years. Correct me if I’m wrong.
You’re right! I was irrationally exuberant….
We can say that management feels their best days are ahead – to quote from the call:
To conclude, we delivered a very strong Q3. We are executing on our strategic priorities, and we are confident that our best days are ahead as we broaden access to our self-service platform and scale globally.
we’re on the right track to eventually get open in '26 and really be able to bring in a ton of advertisers over the following quarters and years
understanding these models gives me confidence that as we get more density of advertisers, we’re actually going to have expanded spend for gaming customers, not diminished spend
We’re still believing very confidently in this 20% to 30% long-term growth rate in our core category. But even in the core, we’re beating that. And then now you’re layering on, on top of that, all this opportunity with the self-service platform. So we’re really excited about where we are focused on what we have underneath our control.
For those interested, here’s a link to the transcript. It is very much worth a read.
Hey @wpr101 I’m not seeing much change in the shares outstanding over the past 3 quarters. I took these from the 10-k
Q1“ As of May 2, 2025, the number of shares of the registrant’s Class A common stock outstanding was 307,698,319 and the number of shares of the registrant’s Class B common stock outstanding was 30,688,541.”
Q2 “As of July 31, 2025, the number of shares of the registrant’s Class A common stock outstanding was 307,636,373 and the number of shares of the registrant’s Class B common stock outstanding was 30,613,541.”
Q3 “As of October 31, 2025, the number of shares (in thousands) of the registrant’s Class A common stock outstanding was 307,597 and the number of shares (in thousands) of the registrant’s Class B common stock outstanding was 30,358."
So Q1 (as of May 2, 2025):
Class A: 307,698,319
Class B: 30,688,541 Total = 307,698,319 + 30,688,541 = 338,386,860 shares
Q2 (as of July 31, 2025):
Class A: 307,636,373
Class B: 30,613,541 Total = 307,636,373 + 30,613,541 = 338,249,914 shares
Q3 (as of October 31, 2025):
(Note: numbers are given in thousands)
Class A: 307,597 × 1,000 = 307,597,000
Class B: 30,358 × 1,000 = 30,358,000 Total = 307,597,000 + 30,358,000 = 337,955,000 shares
APP delivered a great report. No doubt about that. For my own number tracking I find it inconvenient that now, when they report quarterly revenue, they are comparing to the software only revenue from the corresponding quarter of the previous year. I suppose it’s fair since they are still comparing apples to apples and that’s where the future of the business lies; but if we compare to quarterly total revenue then the YoY growth is of course a a bit less good. For instance for next quarter I suppose that they will compare to 999.49mil (since this was the software revenue in Q4 2024) and not to the Q4 2024 reported quarterly revenue of 1372mil (which was software + app revenue).
App mentioned in Q3 2024 “Our core advertising business now represents substantially all of our Software Platform revenue and future focus for the company. Starting with our next shareholder letter and Annual Report on SEC Form 10-K, we will rename our “Software” Platform and associated revenue to “Advertising” to better align with the nature of this business.” - but it seems they actually only stated to do this the past 2 quarters.
BTW, I second @MK76 comment - thank you for all the great work you do and thanks for sharing it!
Your looking at basic outstanding shares and that can be misleading for a fast growing company that provides stock based compensation. Look at diluted shares and you will see the drop in shares. You also see diluted shares getting much closer to basic outstanding shares. This shows that they are buying shares back faster than they are issuing stock options, but employees are converting their options at about the pace the company is buying shares. If that keeps up, it will eventually cause basic share count to drop.
In the last year they decreased the diluted shares by 2.3%. Below is the weighted average of diluted shares for the last 5 quarters.
@MoneySpin I actually just grabbed that stat from the transcript, wasn’t looking intentionally for it. It stands out to me because the standard software company is diluting 3% a year without making much mention of it, and here with AppLovin the shares are noticeably decreasing.
During the quarter, we repurchased and withheld approximately 1.3 million shares for $571 million funded by free cash flow. Over the last 3 quarters, we have reduced our weighted average diluted common shares outstanding from 346 million in Q4 of last year to 341 million this quarter. During the quarter, our Board of Directors increased our share repurchase authorization by an incremental $3.2 billion.
This is true. However, the reason the switch finalized two quarters ago is because APP sold off its gaming segment at that time to focus solely on advertising. With the gaming stream no longer active, the old platform/ad revenue became total revenue for the purpose of YoY comps. It’s also the only revenue figure we will need to worry about for tracking organic growth going forward barring any other sales or acquisitions.
I have the following figures (with the acquisition quarter colored orange to remind me when the sale occurred):
